Could Zynga Exist Without Facebook?
Take a sampling of young adults and ask them about Zynga. There's a better-than-average chance that they won't know much about the company but if you ask them about Farmville or Cityville, they'll likely know about or have played the game. If you asked the same people to talk about Apple and the iPhone, they're likely to know a lot about both.

Although probably not a fair comparison, it should make investors ask themselves, is Zynga a company that has staying power or has it formed a symbiotic relationship with Facebook and other social media platforms that could mean disaster for Zynga if companies like Facebook eventually lose their popularity?

SEE: Is Social Media Slowing Down?

About Zynga
If you ask Zynga, it may deny how much its revenue is tied to Facebook and to a lesser extent, Google+. The company would tell you about its 13 games that include Farmville, Cityville and Words with Friends.

Zynga might even tell you that not only is it on Facebook and Google+ but Zynga games work with IOS Devices (Apple products), Google Android devices and Tencent, China's largest and most popular Internet service provider. This, according to Zynga, proves that even if Facebook someday goes the way of MySpace or the numerous dotcom bubble busters, mobile platforms are here to stay and Zynga's products will be available on the most popular platforms. Zynga also has its own platform -

Zynga's newest hit, Draw Something, came from an acquisition of a smaller company, OMGPOP, and found the top spot for paid apps on Apple's app store after being downloaded 35 million times in its first week. This helped to answer critics who said that Zynga's long-term viability was threatened, in part by its lack of original games. Although as a writer at Motley Fool pointed out, the game is like an online version of Pictionary.

SEE: Valuing Startup Ventures

Gamestop, one of the largest retailers of traditional boxed games, has seen its stock drop 32% since June of 2011. The company's last earnings release showed a 12.5% same store sales decline, proving that the demand for video games, in their boxed form, has dropped to critical levels.

The higher-ups at Zynga will certainly say that Gamestop's dramatic decline is proof that the most popular gaming platform is now social and mobile sites such as Facebook.

Does Zynga Need Facebook?
As CNet blogger Larry Dignan said, Facebook and Zynga are "two symbiotic companies connected at the revenue hip." Looking at the recent stock charts of Zynga and Facebook, Dignan's theory is hard to refute. On the day that Facebook went public and saw disappointing results, Zynga was down 14%, tripping circuit breakers designed to stop the momentum of the loss.

In the days following, Zynga and Facebook have seen similar results, with Facebook and Zynga seeing declines of 18% and 17%, respectively, in the first four days of trading for Facebook.

Facebook recently said in a filing, that it expects the sale of virtual goods, something Zynga relies on for much of its revenue, will grow 9% each year. While that number sounds impressive, it's actually down from an earlier 19% growth rate estimate.

With the number of average users dropping as much as 54% for its two most popular games, not only does Zynga have to worry about the revenue that comes from Facebook, but its recent valuation of 10 times 2012 earnings may quickly become too steep for investors, especially when Apple sites are just shy of 14 times.

The Bottom Line
Some analysts applaud Zynga for making progress on diversifying its business model by not relying as much on Facebook for future revenue. Presently, investors still see Facebook and Zynga as a happy couple, but will it last? If Facebook's stock recovers from a disappointing first few weeks on Wall Street, will Zynga recover too?

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